OPEC+ members reached an agreement to voluntarily cut their oil production by around 2.2 million barrels per day (bpd) at the beginning of next year, led by Saudi Arabia, which will extend its current voluntary reduction.
Saudi Arabia, Russia, and other OPEC+ members, who extract more than 40% of the world's oil, held a virtual meeting and released a statement summarizing the announcements of voluntary cuts by countries at the end of their meeting.
OPEC+ also invited Brazil, one of the top 10 producers, to join the group. The country's Energy Minister said he expected to join in January.
Oil prices fell in the session after rising more than 1% during the day, following the OPEC+ producers' agreement on the cuts.
"The market's reaction shows disbelief in the full effectiveness of the cuts," said Christyan Malek, an analyst at JP Morgan.
"However, the establishment of a new framework for each member to fulfill its cut reflects the degree of confidence and cohesion among members; for example, the fact that Brazil is joining is evidence of the strength in numbers for OPEC+."
The group met to discuss 2024 production at a time when the market is expected to face a possible surplus, and before the end of next month, a cut of one million barrels per day (bpd) by Saudi Arabia will conclude.
OPEC+'s production of about 43 million bpd already reflects cuts of around 5 million bpd aimed at supporting prices and stabilizing the market.
The total cuts amount to 2.2 million bpd from eight producers, the OPEC said in a statement, without initially providing details. The figure includes an extension of the Saudi and Russian voluntary cuts of 1.3 million bpd.
The additional 900,000 bpd promised on Thursday includes 200,000 bpd from Russia's fuel exports, and the rest is divided among six members.
Russian Deputy Prime Minister Alexander Novak said that Russia's voluntary cut would include crude and products.
Meanwhile, the United Arab Emirates (UAE) will cut its production by 163,000 bpd, and Iraq announced an additional reduction of 220,000 bpd in the first quarter.
Saudi Arabia, Russia, the UAE, Iraq, Kuwait, Kazakhstan, and Algeria were among the producers who stated that the cuts would be gradually phased out after the first quarter if market conditions allow.
OPEC+ is focusing on lower production, with prices falling from nearly $98 at the end of September and concerns about weaker economic growth in 2024 and expectations of an oversupply.
The International Energy Agency (IEA) forecasted this month a slowdown in demand in 2024 as "the final stage of the pandemic-driven economic rebound fades, energy efficiency gains advance, electric vehicle fleets expand, and structural factors firm up.
